U.S. home prices are recovering at a blistering pace, but some local housing markets could be on the verge of an abrupt plunge.
The U.S. housing market didn’t just close out the first half of the year on a high note. It pierced an octave the real estate sector hadn’t broached for the better part of a decade.
We already knew home sales had rebounded forcefully in June, blowing past economist forecasts and previous-year levels alike. This week we learned that home prices enjoyed a blistering recovery too.
According to CoreLogic data, U.S. home prices rose a full 1% in June, recording their biggest monthly gain over May levels since 2013. Even with pandemic headwinds, the national housing market has seen prices jump 4.9% annually.
Video: The U.S. housing market has reached a fever pitch
CoreLogic economists say “housing remains a bright spot” for an otherwise shaky economy, but that doesn’t mean the surge in home prices is sustainable.
They expect prices to fall around 1% nationally over the next 12 months. And they warn that in some local housing markets, the damage is going to be a lot worse.
CoreLogic identified five metropolitan housing markets as prime candidates for a plunge:
The company’s HPI Forecast report flagged all five metros as having a “very high” risk of a price decline. Each has a confidence score of more than 75%.
And these local price declines may outstrip national trends by a considerable margin.
Take the Las Vegas-Henderson-Paradise metro. After rising 3.5% over 2019 levels, prices in Nevada’s largest housing market are teed up for an 11.3% meltdown over the next 12 months.
That could be a startling wake-up call to would-be homebuyers and sellers alike.
Local reporting on the Las Vegas market claims desperate house-hunters are engaging in costly bidding wars – and “sellers are smiling all the way to the bank.”
Research from home co-investment company Unison found that although the national housing market has appeared remarkably immune to the pandemic, the picture is more complicated at the local level.
Individual market trends have largely been tied to the health of the industries that drive the area’s economy – and the security of employment in those sectors.
Unison’s Resilient and Vulnerable Cities report flagged Las Vegas as the nation’s most vulnerable housing market. Given the area’s heavy concentration of construction and leisure & hospitality jobs, the report estimates 62.6% of local workers are employed in at-risk industries.
Industry-specific employment considerations factor heavily into CoreLogic’s forecast too, but their economists highlight another risk to local housing markets: the pandemic itself.
They predict metro areas with an “elevated resurgence of COVID-19 cases” are more likely to suffer price declines in the year ahead. That explains why two Arizona markets – Prescott and Lake Havasu – face a “very high” risk of an incoming downturn.
Last modified: September 23, 2020 2:20 PM